diff --git a/blocks/blockstore/blockstore.go b/blocks/blockstore/blockstore.go
index 3cc87a27043..e2c87824363 100644
--- a/blocks/blockstore/blockstore.go
+++ b/blocks/blockstore/blockstore.go
@@ -148,26 +148,31 @@ func (bs *blockstore) AllKeysChan(ctx context.Context) (<-chan key.Key, error) {
 	}
 
 	// this function is here to compartmentalize
-	get := func() (k key.Key, ok bool) {
+	get := func() (key.Key, bool) {
 		select {
 		case <-ctx.Done():
-			return k, false
+			return "", false
 		case e, more := <-res.Next():
 			if !more {
-				return k, false
+				return "", false
 			}
 			if e.Error != nil {
 				log.Debug("blockstore.AllKeysChan got err:", e.Error)
-				return k, false
+				return "", false
 			}
 
 			// need to convert to key.Key using key.KeyFromDsKey.
-			k = key.KeyFromDsKey(ds.NewKey(e.Key))
+			k, err := key.KeyFromDsKey(ds.NewKey(e.Key))
+			if err != nil {
+				log.Warningf("error parsing key from DsKey: ", err)
+				return "", true
+			}
 			log.Debug("blockstore: query got key", k)
 
 			// key must be a multihash. else ignore it.
-			_, err := mh.Cast([]byte(k))
+			_, err = mh.Cast([]byte(k))
 			if err != nil {
+				log.Warningf("key from datastore was not a multihash: ", err)
 				return "", true
 			}
 
diff --git a/blocks/key/key.go b/blocks/key/key.go
index 5c89a3c4c0b..8812ae7a7a5 100644
--- a/blocks/key/key.go
+++ b/blocks/key/key.go
@@ -1,6 +1,7 @@
 package key
 
 import (
+	"encoding/base32"
 	"encoding/json"
 	"fmt"
 
@@ -38,7 +39,7 @@ func B58KeyEncode(k Key) string {
 
 // DsKey returns a Datastore key
 func (k Key) DsKey() ds.Key {
-	return ds.NewKey(string(k))
+	return ds.NewKey(base32.StdEncoding.EncodeToString([]byte(k)))
 }
 
 // UnmarshalJSON returns a JSON-encoded Key (string)
@@ -68,36 +69,13 @@ func (k *Key) Loggable() map[string]interface{} {
 }
 
 // KeyFromDsKey returns a Datastore key
-func KeyFromDsKey(dsk ds.Key) Key {
-	return Key(dsk.String()[1:])
-}
-
-// B58KeyConverter -- for KeyTransform datastores
-// (static as only one obj needed)
-var B58KeyConverter = b58KeyConverter{}
-
-type b58KeyConverter struct{}
-
-// ConvertKey returns a B58 encoded Datastore key
-// TODO: this is hacky because it encodes every path component. some
-// path components may be proper strings already...
-func (b58KeyConverter) ConvertKey(dsk ds.Key) ds.Key {
-	k := ds.NewKey("/")
-	for _, n := range dsk.Namespaces() {
-		k = k.ChildString(b58.Encode([]byte(n)))
+func KeyFromDsKey(dsk ds.Key) (Key, error) {
+	dec, err := base32.StdEncoding.DecodeString(dsk.String()[1:])
+	if err != nil {
+		return "", err
 	}
-	return k
-}
 
-// InvertKey returns a b58 decoded Datastore key
-// TODO: this is hacky because it encodes every path component. some
-// path components may be proper strings already...
-func (b58KeyConverter) InvertKey(dsk ds.Key) ds.Key {
-	k := ds.NewKey("/")
-	for _, n := range dsk.Namespaces() {
-		k = k.ChildString(string(b58.Decode(n)))
-	}
-	return k
+	return Key(dec), nil
 }
 
 // KeySlice is used for sorting Keys
diff --git a/repo/fsrepo/fsrepo.go b/repo/fsrepo/fsrepo.go
index 7bad6e2f184..ff7f7ce6017 100644
--- a/repo/fsrepo/fsrepo.go
+++ b/repo/fsrepo/fsrepo.go
@@ -26,7 +26,7 @@ import (
 var log = logging.Logger("fsrepo")
 
 // version number that we are currently expecting to see
-var RepoVersion = "3"
+var RepoVersion = "4"
 
 var migrationInstructions = `See https://github.com/ipfs/fs-repo-migrations/blob/master/run.md
 Sorry for the inconvenience. In the future, these will run automatically.`
diff --git a/test/sharness/t0080-repo.sh b/test/sharness/t0080-repo.sh
index 2da6a824fa7..696fd30eff7 100755
--- a/test/sharness/t0080-repo.sh
+++ b/test/sharness/t0080-repo.sh
@@ -108,14 +108,14 @@ test_expect_success "'ipfs repo gc' removes file" '
 	grep "removed $PATCH_ROOT" actual7
 '
 
-# TODO: there seems to be a serious bug with leveldb not returning a key.
-test_expect_failure "'ipfs refs local' no longer shows file" '
+test_expect_success "'ipfs refs local' no longer shows file" '
 	EMPTY_DIR=QmUNLLsPACCz1vLxQVkXqqLX5R1X345qqfHbsf67hvA3Nn &&
-	echo "$EMPTY_DIR" >expected8 &&
-	echo "$HASH_WELCOME_DOCS" >>expected8 &&
-	ipfs refs -r "$HASH_WELCOME_DOCS" >>expected8 &&
 	ipfs refs local >actual8 &&
-	test_sort_cmp expected8 actual8
+	grep "QmYCvbfNbCwFR45HiNP45rwJgvatpiW38D961L5qAhUM5Y" actual8 &&
+	grep "$EMPTY_DIR" actual8 &&
+	grep "$HASH_WELCOME_DOCS" actual8 &&
+	test_must_fail grep "$HASH" actual8 &&
+	test_must_fail grep "$PATCH_ROOT" actual8
 '
 
 test_expect_success "adding multiblock random file succeeds" '